MJS / Colarb Capital in the Evening Standard: CEO Shaun Prince claims “all our investors are fine”, calls them liars and blames them for investing

Troubled unregulated bond issuer MJS Capital was the subject of an article in the Evening Standard on Wednesday.

The article focuses on the worries of a handful of investors who loaned money to MJS Capital via its bonds, have not received interest on time, and have attempted to redeem their bonds. Some have succeeded in redeeming their bonds after a long delay, others are still waiting to receive their money.

Such complaints will be familiar to anyone who has read the comments section of our original review or related articles.

CEO Shaun Prince claims that some of these investors are lying about being MJS Capital investors. The investors in question provided documentation to the Evening Standard proving they are in fact investors.

When confronted by his customers’ complaints, Prince said some investors would “lie through their teeth” when it came to getting their money back and asked: “How do you know they’re real investors?” The investors deny they’re lying, and some sent the Evening Standard supporting documentation to their case.

Prince also claims that investors are being unreasonable for wanting to redeem their bonds early. The Evening Standard notes that MJS’ own literature says that early withdrawals are allowed subject to 30 days’ notice and a penalty. In at least some cases, even this shouldn’t be necessary, because MJS Capital’s original investment terms & conditions makes it clear that if a “Default Event” occurs, which includes the late payment of interest, the bonds become “immediately repayable at par”. No penalty, no notice period.

This distinction is largely moot because Prince has admitted to the Evening Standard that MJS Capital is not currently able to repay the bonds anyway.

Prince said that was subject to the company being able to repay it.

Nonetheless, I fail to see how investors are being unreasonable by wanting to stick to the terms under which they handed their money over.

Banking issues continue

MJS Capital is sticking to the story that the failure to pay interest and redemptions on time is a result of MJS falling foul of their banks’ anti-money-laundering rules, which in turn is due to the former presence of Liberal Democrat peer Lord Razzall on their board, plus “a payment from a wealthy client with a Middle East bank account”.

It is now eight months after Lord Razzall resigned from the board in an attempt to resolve these issues.

Prince has blamed the investors for their situation, saying that if they weren’t sophisticated investors they shouldn’t have invested in the bonds in the first place.

He blamed brokers for introducing naive investors into the scheme, saying it was made clear in the documentation that the bonds were only for sophisticated investors. “Why are investors self-certificating as sophisticated investors?” he asked. “That’s the real question here.”

Prince’s attempt to blame the victims of MJS’ banking issues ignores the fact that under UK regulations, unregulated companies which rely on the “sophisticated investor” exemptions to offer investment securities without being regulated, are responsible for making sure their investors do actually qualify as sophisticated.

FCA Handbook COBS 4.12.11

A firm which wishes to rely on any of the self-certified sophisticated investor exemptions (see Part II of the Schedule to the Promotion of Collective Investment Schemes Order, Part II of Schedule 5 to the Financial Promotions Order and COBS 4.12.8 R) should have regard to its duties under the Principles and the client’s best interests rule. In particular, the firm should consider whether the promotion of the non-mainstream pooled investment is in the interests of the client and whether it is fair to make the promotion to that client on the basis of self-certification.

For example, it is unlikely to be appropriate for a firm to make a promotion under any of the self-certified sophisticated investor exemption without first taking reasonable steps to satisfy itself that the investor does in fact have the requisite experience, knowledge or expertise to understand the risks of the non-mainstream pooled investment in question.

Whether this particular buck can be passed to MJS Capital’s brokers depends on whether leaving it to unregulated introducers (such as Direct Property Investments, who previously promoted MJS Capital’s bonds, and are quoted in the article) can be considered “reasonable steps” in the regulatory sense.

Prince’s last quote in the article is “As far as I am aware all of our investors are fine”. Which given what has gone before is dangerously close to Comical Ali territory.

Another MJS Capital shell company to be dissolved

In other MJS Capital news, another shell company previously used by MJS Capital in an attempt to resolve its banking issues (as disclosed in note 10 of its September 2017 accounts) is to be struck off the register.

This follows at least one (possibly two) other MJS Capital shell company/ies being put into administration / liquidation earlier this year, as covered here a couple of weeks ago.

MJS Cap Ltd director Martin Westney filed the application earlier this month. According to its (unaudited) March 2018 accounts, MJS Cap Ltd was at that point the shelliest of shell companies with no assets other than 4 pounds in share capital. (Although MJS Capital‘s September 2017 accounts said that MJS Cap Ltd held £26,871 in cash on MJS Capital’s behalf – but this was six months earlier.) Its dissolution would therefore seem a formality.

Apparently this particular attempt to resolve MJS Capital’s problems with its banks hasn’t worked.

Shaun Prince claims Bond Review is run by a boiler room in Bournemouth

Neither Shaun Prince nor MJS Capital has attempted to contact this journal directly (nor vice versa), but apparently he is not unaware of our coverage. The Evening Standard’s Jim Armitage tells me that Shaun Prince has got it into his head that Bond Review is run by a boiler room outfit based in Bournemouth.

(For those unfamiliar with these terms, a “boiler room” cold-calls prospective investors to sell them worthless investments. Anyway, back to MJS Capital.)

I think the ludicrousness of this allegation can mostly speak for itself. But for the record, if I was going to run a boiler room outfit, it wouldn’t be in Bournemouth.